(MENAFN- ProactiveInvestors) (NYSE:PWE) (TSE:PWT) has announced a 79 percent cut to its dividend while slashing its 2015 capital budget by 26 percent amidst the continued plunge in oil prices.
The large oil and gas producer revised its 2015 budget to $625 million from $840 million and trimmed its dividend to a quarterly payout of 3 cents per share compared to 14 cents previously effective in April.
It also suspended its dividend reinvestment program until further notice with the program still in effect for the fourth quarter dividend which is to be paid out on January 15.
Analysts at Dundee Capital Markets left their neutral rating on the company unchanged but lowered their target price of $3.50 from $3.75 on a trimmed 2015 production outlook and cash flow per share forecast.
Dundee analyst Brian Kristjansen pointed out however that despite the cuts average production guidance for the year is only expected to be off 5 percent as longer cycle time projects waterflood capital and non-development capital projects are shelved.
The 5 percent reduction includes 2000 barrels of oil equivalent per day (boe/d) of uneconomic production that should be shut-in anyway saving $20 million in the process Dundee said.
"The net outcome is not as bad as we had feared when we adjusted our capex assumptions previously" the analyst wrote.
"We had been anticipating a capex program of $750 million (versus the revised $625 million) and production of 94400 BOE/d which is now guided to average 90000 to 100000 BOE/d.
"Relative to our prior estimates this reflects a 17% reduction in capital and only a 2% reduction in our forecast production."
Penn West also expects its production to grow through 2016 despite the revision it said.
Dundee Capital also said it does not fear for the company's viability in the short term as its $1.7 billion credit facility remains completely undrawn with its covenants aligned with its senior notes.
Shares of Penn West which has dominant positions in four of Canada's largest light oil fields surged 10.6 percent to C$2.60 in Toronto as of 11:40am ET.
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